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Do homework
to ensure you get proper value for trade-in
- March 29, 2008
It's estimated that about 50 per cent of all
new-car purchases and 20 per cent of all used-car
purchases involve a trade-in.
In the retail car industry, a trade-in is
any vehicle that a car buyer intends to sell
to the dealership as part of a deal in acquiring
another vehicle (new or used).
In my experience, I've seen trade-ins that
have been in pristine condition, terrible
condition, and a condition that falls somewhere
in between.
When you approach a new-car dealership with
a trade-in, there is a right way and a wrong
way to approach it. Doing things right makes
for a smoother sales process for the dealer
and the customer.
First, make sure your trade-in is in good
physical and mechanical condition.
If the car needs brakes, tires or shocks,
replace them.
Fix any cracks in the windshield and other
eyesores to enhance the car's curb appeal.
I recommend a good, thorough cleaning, both
inside and out. Vacuum the floors and trunk,
and remove any dirt and debris from interior
surfaces, including the dashboard, seats and
door panels.
The service records of your vehicle will affect
the ultimate trade-in value.
If you can verify that your car has been serviced
on a regular basis, it will increase the car's
appraisal value.
When presenting a trade-in to a dealership,
be honest about the car's true condition.
It doesn't pay to lie or mislead the dealership
because the truth about the car will be revealed
in time.
Be realistic. You might have an emotional
attachment to your vehicle, but its value
to the dealership is based on its overall
condition, its mileage and its street value.
In researching the value of a trade-in, try
to determine what demand there is for your
make and model, and whether the dealership
is overstocked for that model. Supply and
demand affects how much a dealership is willing
to pay.
It pays to know the value of your trade-in.
Compare your vehicle (with same kilometres
and options) with an identical make and model
in the marketplace. This should give you a
rough idea of its relative street value.
Dealers cannot afford to pay street values
for trade-ins.
That's because the costs associated with trades
(vehicle inspections, reconditioning, advertising
and sales commissions) don't allow for more
than a small profit on these vehicles.
At some point during the sales process, you'll
be asked to sign a waiver, verifying that
everything you've declared about a trade-in
is true. The waiver is a legal document and
it should be taken seriously.
If it is revealed that someone intentionally
lied about the condition of a trade-in, it
could negatively impact the deal and lead
to legal problems for the person who signed
the waiver.
Car buyers sometimes offer trade-ins on which
they owe money. This rarely poses a problem,
as any outstanding payments can usually be
worked into the purchase and/or lease agreement
on a new vehicle.
One of the big benefits about trade-ins is
the tax advantage.
Say you're buying a new car worth $40,000,
and your trade-in is appraised at $20,000.
That $20,000 can be applied toward the price
of the new car, effectively reducing the selling
price to $20,000.
In this case, the customer would pay tax on
$20,000 ($2,600), as opposed to $40,000 ($5,200),
a savings of $2,600.
No tax savings would be realized if the trade-in
vehicle was sold privately.
Trade-ins are an important part of any new
(or used) car deal; make sure that what you
earn on your trade-in reflects its true value.
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